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What Are the Hidden Costs of Buying a Home?

Costs of buying a home

If only securing a mortgage were a simple and quick process. The entire endeavour would be rewarding and hassle-free. Unfortunately, applying for a home loan is more complex than ever before — and more expensive.

If you’re buying a home for the first time, it’s important to get a handle on all the costs involved. Too many people go head first into the house buying process without researching the process. They quickly discover a range of hidden costs that stretch their finances to breaking point.

Knowing you have the necessary deposit is great, but you also need to know that you can cover the entire cost of buying a home in the UK.

Here are a few of the main house buying costs you need to budget for.

Valuation fees

A lot of lenders charge a flat fee for valuing a property. Providers need to know that they can recoup their outlay quickly if things go wrong. This means they have to verify that the price you’re paying is reasonable. While the fee varies, expect to pay around £500.

Arrangement fees

Mortgage application

Arrangement fees are part and parcel of buying a home in the UK. They cover the administrative tasks required to assess an application and process it quickly. In most cases, you’ll be expected to pay this fee after you’ve been granted a decision in principle but before completion. Unfortunately, this particular fee is usually non-refundable. If the purchase falls through (even if it’s not your fault), you’ll forfeit the money you’ve paid.

Arrangement fees range from around £750 to £2,000.

Legal fees

While there’s no legal requirement to hire a solicitor or a conveyancer, it’s in your best interests to do so. And your mortgage provider may insist on it. Buying and selling a house in the UK is a legal process. It requires legal expertise to see it through to completion. Try to set aside at least £1,000 for these costs. While the final bill may be a lot less, it’s always good to have a contingency fund in place.

Taxes

There is a tax applied to every house sale in the UK with a final sale price above £125,000. Stamp duty is paid by you, the purchaser. The processing of this payment is usually arranged by a solicitor or conveyancer. But it comes out of your pocket. If you’re selling a house at the same time, your legal representative will take the stamp duty from the proceeds of the sale.

The rate at which stamp duty applies to house purchases depends on the final sale price. The more expensive the home, the higher the percentage you pay. Use an online calculator to work out how much stamp duty you will pay when your house purchase goes through. The rates and thresholds change regularly, so it’s important to use the very latest figures.

Survey fees

Buying a home is always a significant investment. You need to know that your money is being spent on a home that is in a good state of repair. This is why surveys and searches are crucial. They identify any current or potential problems with the property that might adversely affect its market value.

While you might be tempted to save money by avoiding surveys, your mortgage provider will probably insist on them. Lengthy, complex surveys can cost as much as £1,000. However, somewhere nearer £500 is more common. Make sure you have around £2,000 set aside for all the various surveys and searches that might be required.

Removal fees

Costs of buying a house — removals

If you have a lot of possessions and large, bulky items of furniture, you might need the expert services of a professional removals firm. These services don’t come cheap, costing as much as £5,000 if the job is a complex one.

Of course, you can save a lot of money by moving your possessions yourself. Hire a large van, and enlist the help of friends and family. But even then, you should budget for the cost of van hire, refreshments for your helpers, insurance and any damage that might occur during the move.

Other costs

Moving into your new home isn’t an end to the costs. You’ll probably want to decorate. And there may be a range of niggling repairs that needed attending to quickly. You may even want to renovate the property. And there’s new furniture to think about. If this is your first home, you might need everything from a new bed to a couch. And then there are all your kitchen appliances to think about.

Make a list of all the required repairs, renovations, furniture and appliances. Create a realistic budget, and stick to it. You might be willing to move in and improve your home gradually over time, but it’s always good to know what you’re facing before you commit to such a huge investment.

If you’re budgeting for a forthcoming house purchase, you may also be selling a property at the same time. You can sell your house fast and avoid a lot of the associated costs by turning to Flying Homes. We buy houses for up to 100 per cent of their market value. And in the right circumstances, you could have the proceeds of the sale in your account within just four weeks.

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